Monopolization/Attempt 2 Monopolize: S Act § 2 & Mergers: C Act § 7

S Act § 2

  1. Crime Against Monopoly
    1. Axns 2 Monopolize /
    2. Attempt 2 Monopolize /
    3. Combo / Conspire 2 Monopolize
  2. Monopolization
    1. BLR #11: Elements of Monopolization
      1. D poss. monopoly pwr +
        1. Use mkt sh. / pwr as surrogate meas. of monopoly pwr
        2. Mkt incl's geog. & substitute prod.
        3. Gen'ly 90% if monopoly , 30% isn't & 60% is borderline
      2. Need excl. conduct / wilful acq. / maint. of monopoly pwr except 4
        1. Growth / massive econ. of scale needed
        2. Superior prod. / busi. acumen of winning competitive battle
        3. Historic accident
    2. Ex's of Excl. Conduct
      1. Foregoing current profit 2 get higher profit as monopolist by running competitor out of busi.
      2. Deny essential facility 2 entrench busi.
    3. Current Rsbl Busi. Pract. as Defense
      1. Could defend by showing indep. justific. of axn perceived as excl. pract.
  3. Attempt 2 Monopolize
    1. BLR #12: Elements
      1. Specif. intent 2 monopolize +
      2. Predatory / anticompetitive conduct +
      3. Dang. probability that D will achieve monopoly pwr

Mergers

  1. Def. of Merger
    1. Busi. Entity Gets All / Part of Other Busi. Entity
  2. Applicable Stt's
    1. S Act § 2 on Monopolization
    2. S Act § 1 on Restraint of Trade By Agmt
    3. Clayton (C) Act § 7 on Mergers
  3. Effects on Competition
    1. Disadv's 2 Competition by Merging
      1. Elim. competitor
      2. Elim. potential competitor
      3. Forecl. competitor from an outlet 2 dist.
      4. Can create entry barrier

C Act § 7

  1. History
    1. Passed After Stand. Oil Case in 1914
    2. End of WWII Brought Incr. in Mergers
    3. In 1950, § 7 Amended 2 End Mergers
    4. Orig'al § 7
      1. Cov'ed only stock acq.
      2. Cov'ed only hz'al trxn's
  2. Reqts
    1. Trxn's on Merging
      1. Buying stock
      2. Buying all / any part of asset such as
        1. Real estate
        2. Excl. patent license
      3. Jt. venture
    2. Entities
      1. Can B all kinds of busi. entity
    3. Types of Trxns
      1. Hz'al
      2. Vertical /
      3. Conglomerate
    4. Merger May Subst'ly Lessen Competition
      1. Means probably
      2. Intended as incipiency stt. 2 catch mergers before bad enough 2 viol. S Act
  3. Cong'al Intent
    1. Left 4 Ct. 2 Dec.
      1. Def. of mkts / subst'l lessening of competition
      2. Case by case analysis analogous 2 rule of rsn, not per se rule
    2. Recog. Some Mergers Benefit Competition
      1. Two small co's get together
      2. Healthy corp. merge w/failing corp.
  4. Vertical Merger
    1. Adv's
      1. Elim. costs
      2. Eff. so good 2 consumers
    2. Sit's When Should B Concerned
      1. All R vertically integ'ed so entry barrier 2 potential entrant b/c
        1. Entry @ 2nd level would B hard +
        2. Mkt is concentrated @ either level
      2. Dang. when vertical integ. facilitate
        1. Make & police actual hz'al price / mkt div. /
        2. Facilitate oligopoly pricing / div. of customers
  5. Hz'al Merger
    1. Presume Hz'al Merger Illegal If
      1. Merger parties have high combined sh's in mkt +
        1. Only need small # like 7.5%
      2. Merger causes sizeable incr. in concentration in mkt
        1. Only need small # like 1.1%
    2. Shift Burden 2 Merger Partn's If Presumption Met
      1. Merger partn's need 2 show merger not likely 2 subst'ly lessen competition
      2. Heavy burden
  6. Hz'al Merger Guidelines
    1. Hart Scott Rodino Pre-Merger Notific. Act
      1. Req's sig. merger 2 B discl'ed 2 govt 30 days in advance
      2. Co's worth $100 mill. & $10 mill. or more merge +
      3. Trxn is 15% / $15 mill. of stock / asset
    2. If merger likely 2 B challenged, negotiate w/DOJ & FTC after file notific.
    3. Analysis 2 B Used by DOJ & FTC
      1. Effect on mkt concentration / degree of incr. in concentration
        1. Herfindahl -Hirshman Index (HHI) takes all co's in mkt, fig. out mkt sh., sq. each sh., & then add up
        2. Unconcentrated if HHI under 1k so merger gen'ly ok
        3. Moderate concentration if HHI 1k-1800 so challenge if incr. HHI by 100 pts / more
        4. High concentration if HHI over 1800 so challenge if incr. HHI by 50 pts / more
      2. Possible bad effects from merger
        1. Incr. chances of hz'al collusion by actual agmt / act as oligopolist
        2. Merger enable 1 actor 2 behave anticompetitively
      3. Entry barriers
        1. If potential entrant can enter mkt, merger might B ok
      4. Possible eff.
        1. Econ. of scale from merger & only from merger
        2. Can't B fictitious
      5. Failing co.
        1. Can't meet fin'al oblgn near future
        2. Can't reorg. successfully under Chp. 11 of Bankr. Act
        3. Unsuccessful good-faith effort 2 get rsbl alt. offers +
        4. W /o acq., assets of failing firm would exit mkt then ok 2 merge

This material is copyrighted by the author. Use of the material for profit is expressly prohibited without the written permission from the author.

Ms. Haeji Hong

May 12, 1998

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